Monday, February 6, 2017

(Sports) MMA: Are the UFC in trouble?

The title question ofthis piece may seem like a silly question after the excellent year the UFC had in 2016 but under close scrutiny, the UFC has the makings of a company with a seriously uncertain future.

On surface value alone, the UFC is in very strong position as it's by far the world's largest MMA promotion in over a billion homes across the world coming offa very strong 2016 which saw them become the most valuable sports promotion ever thanks to superagency WME/IMG leading a consortium to buy UFC parent company ZuffaLLC for $4 billion.

However, since WME IMG purchased the UFC,it's quiteclear that their ambitions for the sports promotiondiffer wildly from former owners and brothersLorenzo and Frank Fertita and current UFC president Dana White. The Fertita brothers and Dana White's intentions from the outset was to make the UFC and MMA as sport a global force to be reckoned with that could compete with other global sports such as Soccer and domestic behemoths such as the NFL.

While the UFCis nowhere near as lucrative as the NFL or soccer by any stretch of the imagination, it’s hard to dispute that the Fertitas and White haven't realized their ambitions for the most part as the UFC presides overone of the very few truly global sports on the planet. Two months beforethe sale, the Fertitas and White were looking to grow the sport even further this time by entering the very fertile Chinese market and according to a report by CBS Sports, were looking to sell a piece of rather than thewhole business to do it 1.

Much must have changed in those two intervening months as the Fertitas and White cashed their chips ending possibly one of the greatest success stories in modern American sport.

Since WME IMG bought the UFC, the agency backed by silver lake partners have been less than forthcoming with their plans to take the UFC to the next level however their actions have spoken volumes. It wasn't long before WME IMG rung the changes as the UFC all but exited Canadian market and lost key and long term personnel including the excellentJoel Silva, long term commentator Mike Goldberg, PR man Dave Sholler and former Manchester City and head of operations for Europe, Middle East and Africa CEOGary Cook as WME IMG looked to trim 15% of the UFC's workforce.

No company cuts 15% of its workforce unless they're in trouble but given the UFC was largely bought with debt and are owned by a company swimming in debt itself, the layoffs make sense. Layoffs aside, he drastic cuts clearlysignify the new owners intention to break fromthe company's long stated ambition for global dominance as the UFC will beby far the largest combat sports promotionin the world whether its activein Canada or Japan or not.

WME/ IMG's plan to take the UFC to the next level are clearly centered around increasing the revenuethe company sees in sports rights which is quite modest in an era where live sports rights is a boom market.Live sports content is by far the most valuable content available and networks are willing to pay a king's ransom for itin an age where TV audiences have never been so fragmented.

With the UFC's 7 year broadcasting rights deal with Fox Sports (which was brokered by WME IMG's CEO Ari Emanuel back in 2011) set to expire next year, WME IMG will almost certainly look to renegotiate the deal forhigher rights fees and will most likely get it as the dealhas been an unmitigated success so far for both parties. The UFC increasing its sportsrights revenue is crucial to WME IMG and the UFC as it would significant ease the company's unhealthy reliance on PPV numbers. However securing higher broadcasting rights may prove tougher than expected as networks, the principal buyers of sports rights,are relianton the rapidlymaturing pay TVmarket which is losing subscribers to SVODgiants Netflix and Amazon Prime.

What this means for WME IMG and the UFC that the current boom for sport rights can't and won't last forever and could damage WME IMG's plans to make a return on its very large and risky investment.

However most of risk that WME IMG should be working overtime to mitigate lies with the stormy relationship the UFC has with its talent. WME IMG have been notablyslow about improving the at times poisonousrelationship the UFC has with its fighters which has soured since the WME IMG bought the company. Fighters pay has been a consistent issue that the UFC has either failed to address or outright antagonized which has seen the creation of organizations dedicated to negotiate a better deal on the behalf of fighters including the MMAAA, PFA and MMAFA. The UFC has so far managed to ignore these organizations and even lambastfighters for complaining about compensationbut with fighters looking for a bigger piece of pie and ever more conscious of their worth to the promotion, WME IMG and the UFC can no longer brush aside calls for greater fighter pay or unionization as the promotion has become a more star driven operation.

In the past, the UFC didn't have to worry about maintaining a cordial relationship with its talent as the UFC a stronger brand than most if not all its fighters on its roster. However, in recent years, this has become less true and no fighter in the short history of the sport exemplifies this more than the mercurial UFC lightweight champion Connor McGregor.With the recent decline of Rhonda Rousey and the legal troubles of future hall of famer Jon Jones, The UFC has become increasinglyreliant on McGregor who is by far the promotion's stand out star and, unfortunately for WME IMG and the UFC, no one knows this better than the charmingly cocksure Dublin native.

The UFC has never dealt with a star like McGregor and of late its starting to showto with Whitepubliclythreatening McGregor as he continues to chase a fight outside the promotion with semi retired boxing superstar Floyd Mayweather. Why WME IMG hasn't stepped to mend the fractured relationship between McGregor and the UFC is inexplicable asthey've effectively leftthe UFC, a company that has a storied history of alienating its top talent,to deal with a man their $4 billion bet hingeson.

WME IMG has much more experience dealing with stars with a much bigger public profile than McGregor which makes their decision to leave White, a man whosenaturally combative and used to getting his own way, to deal with McGregor, another man whose no stranger to conflict, certifiable. It seems atlast that WME IMG have gotten the message when it recently invited the UFC's roster to a retreat in Las Vegas. While it will take more than luxurious surroundings and Las Vegas sun to heal the fractured relationship the promotion has with a growing number of fighters, it show that WME IMG are serious about fixing what has been the UFC's biggestblind spot for years on end.

In sum, whatever over the next few months and years, it's mostcertainlygoingto be a white knuckle ride and The UFC would have it any other way.